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Involved in a CRA GST / HST Audit?

When facing a GST/HST audit, you don’t need a tax lawyer. At Faris CPA, we’ve been providing GST/HST audit assistance and saving taxpayers unnecessary legal fees for over a decade.

Use the contact form or call us today at 1-844-340-5771.

 

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CRA GST HST Audits

What is GST & HST?

The GST/HST is a value added tax that applies to the additional value created by a business in the supply of a good or service.  GST stands for “Goods and Services Tax”, and is the tax collected by the Federal Government. In some cases, Provinces chose to opt into the value added tax system and harmonize their sales tax with the GST, giving rise to the HST or “Harmonized Sales Tax”.  The HST reduced compliance burdens and tax costs for business in the provinces that have it.  The starting point, if you sell any good or service, is that GST/HST applies and has to be charged, collected, and remitted unless you find a specific exemption that applies.

The tax is collected on behalf of the Government of Canada and the funds collected by your business are held in trust for the Government of Canada.  Depending on a business’s reporting period for GST/HST, the business is required to report the amount of GST/HST collected or collectable in that period as well as the Input Tax Credits (ITCs) deductible from the GST/HST collected. ITCs are the amounts of GST/HST charged to you and paid by you to suppliers of goods and services you use or consume in the process of providing your business’s own goods and services.  The difference between GST/HST collected and ITCs deductible, is the Net Tax.  Where the total amount of the GST/HST charged is more than the amount of ITCs you can claim for a period, in other words where the Net Tax is positive, you have to remit the Net Tax To the Government of Canada.  However, where the amount of GST/HST you charged is less than the ITCs deductible, you are entitled to and can claim a refund from the government. Learn more about the CRA audit process

Facing a CRA GST/HST Audit?
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Do I Need to Register for GST/HST?

You are required to register your business for GST/HST if your business revenues from taxable supplies exceed the small supplier threshold ($30,000 in a quarter not taking into account any expenses). If you are a small supplier, you may still wish to voluntarily register for GST/HST so you can claim ITCs on purchases for your business.  Not every business that exceeds the small supplier threshold needs to register for GST/HST with the Canada Revenue Agency.  If your business ONLY provides exempt supplies (e.g. Child Care Services, Long tern residential rentals, most educational services including music lessons, and others) you do not have to collect GST/HST and are also not entitled to claim ITCs.  Your tax expert can help you determine which of your goods and services are taxable, exempt, or zero-rated, and whether or not you need to register for GST/HST.  You register for a GST/HST account by using your Business Number (BN) with the Canada Revenue Agency by filling out a Form RC1 “Request for a business number and certain program accounts”. 

As with any self-reporting system, the Government of Canada relies on the honesty and accuracy of business owners in administering this tax.  Your reporting period is the period that your business uses to file your GST/HST returns.  If you provide annual taxable supplies of less than $1,500,000 then you are assigned an annual reporting period, where the value of your taxable supplies is between $1,500,000 and $6,000,000, you are assigned a quarterly reporting period, and where your taxable supplies exceed $6,000,000, you are assigned a monthly reporting period.  The government, through the Canada Revenue Agency (CRA), conducts audits to make sure that business owners are reporting the GST/HST collected or collectible accurately, and are not claiming ITCs they are not entitled to. In other words, the CRA ensures that you are meeting your reporting requirements for each period.  

CRA GST & HST Audits

Audits can be very demanding, both on your business and personal resources as well as emotionally and mentally.  The CRA does not publish the reasons they decide to audit or not audit a business, however, experience has shown that there are a number of audit triggers for GST/HST audits.  These triggers can include:

  •   Claiming a GST/HST refund;
  •   Having losses for a number of quarters;
  •   Claiming ITCs that exceed the industry average;
  •   Reporting revenues that fall well below the industry average;
  •   Being in high-risk industries (exports, temporary employment services, cash-heavy industries); and
  •   Reporting discrepancies across various returns.

Audits may also be consequential, meaning that if the CRA’s audit of a client or supplier of yours flags your business as a potential risk for tax evasion, the CRA may choose to also audit your business.

It’s always best to assume that your business is going to be audited and be prepared to defend your position.  The best defence against an audit is to make sure you keep good records of sales and expenses.  When it comes to sales records, make sure that the record contains enough information about the good and service provided, the date, the customer contact information, and any information about coupons, discounts, or promotions applicable.  When it comes to invoices for goods and services you use or consume in your own business, make sure your supplier gives you an invoice that has the following information: 

  •   The legal name and address of your supplier;
  •   Details about the nature of the good and service supplied;
  •   The breakdown of the cost of the goods or services, the GST/HST applies, and the total paid;
  •   A date for the invoice (supply date and due date); and
  •   The GST/HST number of the supplier (you have to check to make sure that they are in good standing with the CRA).

You should also hold on to copies of any GST/HST elections you make as well as copies of past filings and payment confirmations.  

Hire an Experienced CPA for a CRA GST/HST Audit

Given that GST/HST is a trust debt, you are personally (as a sole proprietor or partner), and you as director (where the business is run as a corporation), are, in most cases, liable for the tax debt of the business.  Hiring a CPA will help ensure that you charge and collect the right amount of tax on the right goods and services, that you deal with your ITCs claimed properly, and that you are meeting your filing requirements so as to avoid audits, obtain favourable results in an audit, and avoid paying penalties and interest.

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“Sam Faris reduced the significant unreported income based on net worth audit to be nil. Sam’s approach in fighting these types of complex audits is unique and sophisticated. He found countless mistakes made by the auditor, which were rectified when Sam appealed the audit decision. Instead of owning a significant amount of taxes, Sam reduced it to zero. I highly recommend hiring Sam for this type of audit and any CRA problem.”

Case Study

A new client had a difficult CRA audit that disallowed an HST refund valued at almost one million dollars. The CRA audit revealed that his previous accountant had made significant errors which resulted in the disallowing of the HST refund valued at approximately 1 million dollars.

He was referred to our firm by another client of ours.

We performed an intensive review of the proposal letter from the CRA along with the income tax act. We were convinced that the case would be won if the records were corrected and a new argument was submitted as a replace to the proposal letter from the CRA.

The CRA auditor denied the response. Our firm filed a Notice of Objection to the CRA.

The Notice of Objection was successful, and our client was able to recover, not only the original refund, but there were additional amounts that the previous accounted had missed that were awarded to our client as well.

Other Services

Faris CPA is proud to offer a wide variety of tax-related services, not limited to:

FAQS

What is an HST audit?

An HST audit is carried out by the CRA on businesses who have to pay the tax. During the process, the business owner is asked to provide the auditor with their HST elections as well as receipts and other purchase and sales documentation. It is important to keep these documents in good order. Trying to sort them out retrospectively is a surprisingly time-consuming and difficult process.

How do I prepare for a GST audit?

Businesses can prepare for a GST audit by making sure that all of their accounts and financial records are always in good order. That means making sure that the details of each sale are recorded in full. As well as ensuring that suppliers provide you with proper invoices. Armed with this information, a business will be able to prove to the auditor that they have complied fully with the rules surrounding the collection of, and payment of, GST.

What is a GST audit?

A GST audit is when an auditor from the CRA examines a business´ financial records. In order to check that they have paid the correct amount of Goods and Services Tax. To facilitate this audit, the business is asked to provide documentation, mostly invoices, to support what they declared on their returns. The invoices need to contain a pre-prescribed list of details for the auditor to accept them as proof that the correct level of GST has been paid.

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Pro Tip

ACCESSING THE SMALL BUSINESS DEDUCTION IN YOUR BUSINESS

The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.

Save your time and money and hire Sam Faris for any problem with the CRA. He is the man to fight the CRA and get you the best results. His firm a top consulting firm I have ever dealt with. He is honest, trustworthy and very professional on both personal and business levels. He won my case against the CRA and the audit went through very smoothly because of his top notch service and expertise. I wish I met Sam before. I paid other professionals but they were disappointing and did not deliver what Sam delivered.
Many thanks Sam and I will definitely refer my clients and family to him.
Response from the owner:Thank you for the five stars Google review and your kind words. We strive to provide the best customer service and to ensure that our clients feel that they are in a safe hands while we are working on their files. We understand that CRA audits are not a pleasant experience to have and we do our best to provide strong arguments to dispute CRA’s decisions and protect our clients’ best interests. Thanks you again and we will remain at your disposal if you need our service in the future.
I was referred to Sam Faris by a tax lawyer to handle my a complicated tax audit by the CRA and to refile all my outstanding corporate and personal tax returns. He was highly recommended by the tax lawyer and by other professional. The minute I hired Sam to sort out the big mess that I had with the CRA, I felt I am safe and in a good hands. He and his team were responsive to my questions and my concerns. Once he completed his work, he insisted to meet in person with the auditor and the team leader. His work quality was second to none. He backed up all accounts prepared a perfect reconciliation. On that basis, he presented his work confidentially and was able to convince the CRA team with his position and his calculations. I must admit that Sam Faris is the best tax consultant and he is a life saver. As a side note, his fee is very reasonable considering to other professionals and more importantly the work quality and the results that he achieved are unbeatable.
Response from the owner:Many thanks Moss for the positive review.
I was referred to Mr. faris by a friend of mine who happened to be his client for more than 10 years. I was struggling with the CRA reading HST and income tax audit. CRA claimed that I owe significant amount of HST and income tax. Mr. Faris was able to perform a detailed analysis which was backed up with previous court cases. As a result of his sophisticated work, he was able to convince CRA that the property was not subject to HST and income tax and the case was closed with zero hst owing. Thank you Mr. Faris for all your hard work.
Sam and his team are an amazing tax consulting firm. They know how the CRA operates and are able to get results based on your actual numbers, not the inflated CRA ones. More importantly, they are super professional and more cost-effective than I would've thought. The Faris team really are life-savers!
Response from the owner:Dear Aymann Your feedback is much appreciated. We have been in business many years now. We have dealt with countless and different types of CRA audits. We noticed that the CRA always attempt to assess on inflated numbers. We have been successful to reduce the CRA numbers and to prove to the CRA their numbers are inflated. As result, CRA would accept our numbers as our work is perfectly reconciled and backed up with the appropriate documents.
I found Sam online and I was I impressed with the excellent reputation and all the good results that he achieved to his clients. I decided to hire him to handle a complex matter with the CRA. With no surprises, Sam performed the work on timely manner and in the most efficient way possible. He kept his promises and he saved me significant amount CRA claimed that I owed. Sam was very transparent while working on my file and kept me in the loop. If you are looking for an excellent and expert tax consultant, Sam is the man. You will never be disappointed.
Response from the owner:My pleasure and thank you for the positive review.
Faris CPA has helped me to go through a very difficult time in my life while the CRA was after me and my family claiming that we have significant amount of unreported income. Sam and his team took over the file and dealt with it in the most efficient and effective way. They provided every single reconciliation and backup to show that the CRA assumptions are baseless. They were able to stop the escalation based on their sophisticated strategy and I am so grateful for them.
Sam and his team are expert and solid tax consultants who can fight CRA audits confidentiality and aggressively. They are the sharks and the best in the country to do so.
Response from the owner:Omar Your review and kind words are much appreciated. We are glad that you are happy with our performance and the outcome of the audit. we will remain at your disposal if you need our service in the future.
I was referred to Mr. Faris by another professional who recommended him to deal with my multiple years of outstanding corporate and tax returns. I interviewed Sam and was impressed in his confidence and transparency. He did not promise the moon just to get my business. Sam was able to file all returns under the voluntary disclosure program. After completing filling all tax returns, I realized the amount of money he saved me. I enjoyed very much working with him. He ensured that the work progress flow smoothly without any complications. He took to consideration the emotional stress factor and he was available to speak with me even beyond business hours just to make me more calm and to make me feel that he is on top of the matter and it will be resolved to my satisfaction. Indeed, this is what happened. The matter was resolved to my satisfaction and CRA concluded that the returns which Sam filed are reasonable and there is no need to further audit me nor my company. In summary, Sam is a life saver. He saved me and saved my family and now I am in the right track where all my tax filing obligations are met and I don’t owe any taxes. So grateful to Sam and his dedication while working on my file.
Response from the owner:Raj Thank you for the positive Google review. We are happy that you are satisfied with our services. Voluntary disclosure program is one of our specialties and we have dealt with many complex cases too. We get referrals from other professionals as we have been in the business of fighting CRA many years and we have countless success stories that many professionals are aware of. Please do contact us if you require further help in the future.
Sam is an excellent CPA and the best tax consultant in the country. He helped me to deal with a very complicated tax audit with the CRA where the CRA sent me a proposal assessment of 1.5 million dollars based on their net worth audit calculation and analysis. Sam was able to provide a counter analysis which highlighted significant mistakes that the auditor made with his assumptions and calculations. It’s ridicules that CRA wanted to taxed me on a loan that I obtained from my bank. Sam dealt with this audit perfectly. He demonstrated a very high level of expertise and CRA had to accept his counter analysis with no question asked. Many thanks to Sam’s efforts and high business standards in dealing with this issue and resolve it to my favor. I will have Sam as my primary CPA going forward so I can focus on doing business and will have a peace of mind in terms of the high quality of work done by him. Well deserved this review with the 5 stars rating.
Response from the owner:Yash Thank you for the positive feedback and the 5 stars Google review. We are glad that you are happy with our service and you are satisfied with the outcome. Net worth audits are very complicated and disputing them might get very tricky. We have been dealing with the same types of audits for many years and we are confident in fighting CRA and to point out mistakes that the auditor have made while performing the audit. We will remain at your disposal anytime you contact us in the future.